Financialization is the Main Cause of Decline in Brick-and-Mortar Retail in USA
Here is another topic I have been thinking about writing for past few years. As most readers know, there is no shortage of evidence that physical retail outlets have been on an irreversible decline in USA and other parts of Anglosphere, for at least the past decade. However, most people in this group of countries seems to believe that the rise of Amazon and other online retail outlets was a cosmic inevitability. Except, that this is not true. The thing is.. physical retail outlets are in very good shape in every part of the world which is not an Anglosphere country. More curiously, other countries with highly developed online retail sector such as China have a very large and flourishing physical retail sector. It is as if online retail coexists and complement physical retail in all countries that are not part of the Anglosphere.
So what is going on? Why is the physical retail sector in free fall throughout countries in the Anglosphere. As you will see, the factors driving demise of physical retail in this group of countries are almost identical to those which have previously led to widespread de-industrialization, privatization of public goods, episodes of financial austerity, rise in precarity of jobs and careers and much much more. It all comes down to late capitalism aka neoliberalism aka financialization. To understand what I am talking about, let me ask you a simple question. How do physical retailers in the West manage to go under while their equivalents in other countries remain strong or grow. This is especially hard to explain when you realize that people still need the products which they sell- ranging from clothes and shoes to furniture and appliances.
Let me start by explaining the changes I have personally witnessed in this sector over the past two decades. As some of you might remember, I moved here when I was 20 in the late 1990s. At that time the physical retail sector in these countries, while having gone through a few prior contractions, was still reasonably healthy. The shops and department stores were still well stocked with a diversity of products which people wanted, there were always enough salespeople and these businesses were still making a steady but decent profit. So what changed between late 1990s and today? Well.. for starters, there has been a shrinkage in amount of disposable income for most people in West. But this, by itself, does not explain why physical retail is still doing very well in Continental Europe, East Asia and other parts of world. Also, many products sold in West have become less expensive due to outsourcing from China and Mexico.
And yet retail stores, large and small, in the the Anglosphere, have been going out of business at a much higher rate than at any time since WW2. More problematically, the ones going out of business are not being replaced with others of similar size. Even large chains which survived the great depression have recently gone bust or are on the verge of going tits up. What makes physical retail outlets in some countries far more fragile when compared to their Asian or European counterparts? Here is my partial explanation, based on what I saw over past two decades. Let us start by talking about three large departmental store chains, which shall remain unnamed. Of these three, two went belly up during past decade while the other one is on life support. FYI- I am using these three as examples because I used to frequent them and have bought tons of stuff from them over the years.
See.. in the late 1990s, all three were doing very well. They sold tons of stuff which people wanted, had knowledgeable sales staff and paid attention to the quality of products they were selling. Sure, they were more expensive to shop at than WalMart but they had no problems attracting customers or making a steady decent profit. The demise of first chain, which used to be a family name in the parts I live in, began once a new management style took over in the mid-1990s. Under the guise of increasing shareholder value, the new management started doing tons of short-sighted shit such as selling their ownership of their coveted physical retail space only to renting it back, laying off older experienced employees, flooding their shelves and racks with items of lesser quality and making their remaining employees push credit cards and extended warranties. A name which was once synonymous with good quality, reasonable prices and experienced salespeople became associated with poor customer experience, shitty products and general mismanagement.
Increasingly, decisions about which products to stock were made by a bunch of MBAs and other assorted bottom-feeders in their 'headquarters'. They had no interest in any feedback from their employees who understood the local markets and customer tastes far better than the greedy assholes at HQ. To make matters worse, they spent all their short-term financial gains on giving themselves hefty bonuses rather than spending that money on updating their stores. You can guess how all of this ended. After about a decade of such bold and innovative changes in management style, a large chain which was once a household name in this part of the country went under. Oh.. and they stiffed their employee pensions on the way out. If all of this sounds familiar, it should be because this is the rough template followed by almost every retail chain that has gone under, or is in the process of doing so.
The next chain I am going to talk about is Sears, and most of you know how that shit went down. While Sears was being mismanaged for at least two or three decades, things went especially bad towards the end (link 1, link 2, link 3 and link 4). So let us move on and talk about another large and well-known departmental store chain which is not yet dead, but pretty close. Once again, it took an almost identical pathway of "new management styles" which led to under-staffing, selling inferior products, trying to push products which nobody wants to buy, spending little to no money on updating stores, an incredibly bad online sales portal and treating its employees and customers like shit while helping themselves to huge performance bonuses.
But you know what is truly surprising? The pattern of management malpractice and looting remains constant in the Anglosphere whether the afflicted corporation was selling clothes, shoes, appliances, electronics, toys, guitars or making appliances, cars and aircraft. Their demise was not, therefore, due to any specific business conditions in their sector of economy. Rather, it was due to a very specific style of management which has gained primacy in Anglosphere starting in the 1980s. To put it another way, the management of large corporations in these countries has become the functional equivalent of viruses that infect cells, to extract all the resources they can and then move on to infect other cells to continue this cycle. The poor transfer of this parasitic ideology outside the Anglosphere is the main reason why Asian companies remain dominant in Automobile manufacturing and continental Europe still retains a decent percentage of its manufacturing infrastructure and most physical retail outlets outside the Anglosphere are doing just fine.
What do you think? Comments?